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loan scam and 1099C


schirallicpa

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I may have asked this before, but cannot find.

I have a client who was scammed and took out a loan for some dumb thing that she was taken for.  When she realized that it was a scam, she contacted the lender and made arrangements to make a settlement on the account.  This was in 2017 and 2018.  She is an older woman and taken advantage of.  Now, in 2020 she has received a 1099C for the settlement.  Theft losses are not an option since no federal disaster.  The reporting of the 1099 is creating about $5500 of fed tax.  I can't use 982 - I don't think - because she really wasn't insolvent.  

Any suggestions?

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